Phoenix, AZ – Avison Young recently released its Second Quarter 2024 Phoenix Industrial Market Report.

In Q2 2024, the Phoenix industrial market saw a record level of new inventory being delivered. However, the pace of new construction projects is starting to slow down as many of them near completion. By the end of Q2 2024, 11.5 million square feet (msf) of new space were added to the market, with an additional 30.6 msf still in the pipeline. Significant development is taking place in the Northwest, Southeast, and Southwest submarkets, with the Northwest submarket alone delivering 5.5 msf in Q2 and having 16.1 msf currently under construction.

During Q2 2024, the Phoenix industrial market demonstrated strong performance, with direct absorption reaching 6,875,763 sf. This positive absorption indicates the market's strength and ongoing demand for industrial space, despite the growth in inventory. As more space is delivered, the market's ability to absorb large amounts of newly constructed space may be impacted, but its overall health and occupier demand suggest positive results in the foreseeable future.

“The Phoenix industrial market continues to be a national leader in demand and new construction deliveries. While the deliveries are leading to an increase in vacancy rates, a slowdown in new starts should create stability and higher occupancy moving forward.  Remarkably, during this time, vacancy is at historic lows in properties under 20,000 sf, reflecting the high demand for smaller occupiers. Overall, the market is healthy, and the fundamentals set the stage for more growth and success in the years ahead,” said Kevin Helland, Senior Vice President – Phoenix, with Avison Young.

The Phoenix industrial market has an 11.9% vacancy rate, up from pre-pandemic levels primarily as a result of new deliveries. In Q2 2024, there was a gap of 400 basis points between vacant and available space. This is a significant change from Q2 2020, when the gap was 170 basis points, highlighting the impact of new developments. With many construction projects nearing completion and new starts reducing, the market’s vacancy rates should stabilize soon and begin to trend lower.

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